17 March 2023
The Ministry of Finance has notified an amendment in Prevention of Money-Laundering Act, 2002 (“Act”) by way of Notification No. S.O. 1072(E) dated 07.03.2023 (“Notification”). The Act has been amended to include cryptocurrency or virtual digital assets (“VDA”) transactions within its scope. This means that certain transactions are now subject to the provisions of the Act.
The amendment shall be applicable to the following entities:
(a) exchange between virtual digital assets and fiat currencies;
(b) exchange between one or more forms of virtual digital assets;
(c) transfer of virtual digital assets;
(d) safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets; and
(e) participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset.
If a company falls under the above mentioned categories they are considered to be Virtual Assets Service Providers (“VASPs”) and are required to follow various reporting requirements.
It can be therefore concluded that, the activities of any company who is just a marketplace or an aggregator of VDAs would not fall within the purview of this amendment. However, if a company engages in activities related to the buying and selling of VDAs, such as processing transactions, offering VDAs for sale, making purchase offers, or providing financial services related to them, it will be considered a reporting entity. In our view, advisory services or other non-financial services which do not include any actual facilitation of payments/ sale would not be covered under the ambit of the amendment. However, if a reporting entity engages in such activities, it must comply with the above mentioned requirements.
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